The main problem is that payments you get from an IRA (formally called an “individual retirement arrangement” by the IRS) before you reach age 59 ½ are considered early distributions. And the taxable portion of an early distribution from a traditional IRA is generally subject to an additional 10% tax – on top of whatever income tax you owe already for withdrawing tax-deferred savings.

With such steep taxes, it’s worth considering a home-equity loan as an alternative to an early IRA distribution, especially since the loan interest may be tax deductible.

There are situations, however, in which the government waives the penalty, such as when you buy your first home, incur certain medical or educational expenses, or become disabled.

You may also qualify if you take what are called “substantially equal periodic payments,” or 72(t) payments, but you have to be careful to stick to your payment schedule – or risk, again, getting dinged with penalties.

And the exceptions to the rule have limits. First-time homebuyers, for example, cannot use more than $10,000 in IRA savings. You can use early withdrawals to pay for unreimbursed medical expenses only if they are more than 7.5% of your adjusted gross income.

And to qualify for the disability exception, a doctor must determine that the disability is fatal, or at least expected to last a long time.

For more information, go to the IRS’s website and look up Publication 590, “Individual Retirement Arrangements.”

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About Encore

Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.